As the North American session begins, the AUD is the strongest and the CHF is the weakest. The USD is in the middle of the league table with strong gains vs the CHF and more modest changes (up and down) vs the other currencies.
The SNB surprised the market by cutting rates by 25 basis points sending the CHF to the downside. The CHF is lower by -0.70% vs the USD and -0.61% vs the EUR. The biggest move is against the AUD with a decline of near 1.0%.
- SNB reduced the key policy rate by 25 basis points to 1.50% from 1.75%.
- This decision reflects effective measures against inflation, allowing for policy easing.
- Inflation is expected to stay below 2% in the coming years.
- The easing aims to maintain appropriate monetary conditions.
- Inflation projections are adjusted: 1.4% for 2024 (down from 1.9%), 1.2% for 2025 (down from 1.6%), and 1.1% for 2026.
- SNB is prepared to adjust its monetary policy further if necessary to maintain price stability.
- SNB Chairman Thomas Jordan emphasized that the rate cut is aligned with their policy framework and is not influenced by his impending departure in September.
- The SNB's decisions are independent of other central banks and focused on their mandate, without giving forward guidance on future rates.
Looking at the weekly chart of the EURCHF, the pairs run to the upside today (lower CHF) has the pair testing and trading above and below its 100-week MA at 0.9755. The high price reached 0.9781 but has backed off and trades at 0.8744 currently . The price of the EURCHF has not closed above its 100-week MA since September 2021. There is room to roam, but so far, sellers are trying to limit the gain. Keep that level in mind going forward. A break with momentum would have traders looking toward the 38.2% of the last move lower at 0.9968 if the buyers are intent in the shift. The ECB is not expected to cut until June.
In Australia, the employment numbers came in much stronger than expected with a decline to 3.7% versus 4.0% expected and 4.1% last month. The employment change was also much stronger at 116.5 K versus 39.7 K last month. That was the highest level since December 2021.
The Bank of England kept rates unchanged as expected by a vote of 0-1-8 with one member voting for a cut.
- The Bank of England's Monetary Policy Committee (MPC) aims to meet the 2% inflation target, supporting growth and employment, and voted 8–1 to keep the Bank Rate at 5.25% in their March 2024 meeting.
- One member favored reducing the Bank Rate to 5%.
- Market-implied policy rates in advanced economies have increased, with inflation pressures easing less than expected in the U.S. and euro area. Middle East developments, including Red Sea shipping disruptions, pose significant risks.
- UK GDP and market sector output, after declining in the latter half of the previous year, are expected to grow in the first half of this year, with business surveys indicating an improving activity outlook.
- The Spring Budget 2024's fiscal measures are likely to boost GDP by about 0.25% in the coming years and have a smaller impact on inflationary pressures due to a potential increase in supply.
- Despite ongoing uncertainties in labor market indicators, the labor market is loosening but remains tight, with nominal wage growth moderating.
- CPI inflation dropped to 3.4% in February, slightly below expectations, with services inflation still high at 6.1%.
- CPI inflation is expected to fall slightly below the 2% target in Q2 2024, with a temporary rise in later quarters due to energy prices, and services inflation anticipated to decrease gradually.
- The MPC emphasizes the importance of returning CPI inflation to the 2% target sustainably, acknowledging occasional deviations due to shocks.
- The current restrictive monetary policy aims to mitigate inflationary pressures, with a recognition that policy must remain restrictive until the risk of above-target inflation subsides.
- The MPC is ready to adjust policy as needed, closely monitoring inflation persistence and economic resilience, including labor market tightness, wage growth, and services inflation, to determine the duration of the current Bank Rate level.
The GBPUSD has moved lower on the news and is trading above and below its 100-hour MA and 100 bar MA on the 4-hour chart at 1.2733 area.
A snapshot of the other markets as the North American session begins currently shows:
- Crude oil is trading down -$0.52 or -0.63% at $80.76. At this time yesterday, the price was at $81.92
- Gold is trading up $21.75 or 1.0% at $2207.54. At this time yesterday, the price was at $2153.40
- Silver is trading down $0.14 or -0.58% at $25.42. At this time yesterday, the price was at $24.82
- Bitcoin currently trades at $67,025. The low price yesterday reached $60,760 (the lowest level since March 5) before rebounding. At this time yesterday, the price was trading at $63,711. The all-time high price reached last week reached $73,794. From the high to the low today, the digital currency fell -17.66%. From the low yesterday to the high today, the digital currency has rebounded 12.33%. Volatile.
In the premarket, the major indices are trading higher a day after all three indices closed at record levels yesterday:
- Dow Industrial Average futures are implying a gain of 93 points. Yesterday the index rose 401.37 points or 1.03% at 39512.14
- S&P futures are implying a gain of 21.63 points. Yesterday, the index rose 46.11 points or 0.89% at 5224.63
- Nasdaq futures are implying a gain of 161 points. Yesterday, the index rose 202.62 points or 1.25% at 16369.41
In the European equity markets, the major indices are trading mostly higher.
- German DAX, +0.46%
- France CAC , -0.04%
- UK FTSE 100, +1.35%
- Spain's Ibex, +1.08%
- Italy's FTSE MIB, +0.17 % (delayed by 10 minutes).
Shares in the Asian Pacific markets were mostly higher:
- Japan's Nikkei 225, +2.03%
- China's Shanghai Composite Index, -0.08%
- Hong Kong's Hang Seng index, +1.93%
- Australia S&P/ASX index, +1.12%
Looking at the US debt market, yields are lower:
- 2-year yield 4.566%, -3,2 basis points. At this time yesterday, the yield was at 4.681%
- 5-year yield 4.192% -4.9 basis points. At this time yesterday, the yield was at 4.288%
- 10-year yield 4.221% -4.9 basis points. At this time yesterday, the yield was at 4.284%
- 30-year yield 4.410% -4.4 basis points. At this time yesterday, the yield was at 4.434%
Yesterday after the Fed decision, the yield curve started to move less negative. Recall. the spread between the 2 and 30 year moved to positive territory in January to +7.5 basis points at the steepest. It then fell to -33 basis points in February before moving back higher.
- The 2-10 year spread is at -34.4 basis points. At this time yesterday, the spread was at -39.6 basis points
- The 2-30 year spread is at -15.4 basis points. At this time yesterday, the spread was at -24.8 basis points
European benchmark 10-year yields are lower:
